Tuesday, February 3, 2009

Change comes to DC? Let's hope NJ, too

Just how much is New Jersey’s micro brewing industry worth to state coffers, in terms of tax revenues and fees (including corporate and sales tax revenues)?

That’s what we’re trying to find out.

The kind folks at the New Jersey Department of Treasury (under their Open Public Records Act obligations) notified us today that they’re inclined to take another three days to process our request for the financial tallies regarding our state’s small-batch brewers, and Garden State wineries, for which we also sought the same information.

No problem, Treasury; we’re patient. And thanks for the heads-up email, even if it was obligatory.

For the record, we’re not expecting a dramatic figure from our request regarding microbrewers. And we’re curious about the wineries, since they are under less stringent regulations pertaining to direct sales to the public.

Therein lies the heart of our OPRA requests: compare the two industries. Vintners are likely generating more sales tax revenues à la direct sales to the public than microbreweries because they can sell unfettered. By law, our microbrewers can sell only two six-packs or two growlers per person per visit to the brewery.

More on that in a minute. It’s important right now to highlight the significance of the 7 cents on the dollar sales tax, especially in our state which has gaping holes in the current budget and for years now has been resorting to gimmicks to plug annual deficits to fulfill the state constitutional requirement of having a balance between incoming revenues and spending at the start of the fiscal year.

Sales tax – which, unlike income tax, everyone pays – is a big chunk of the state budget, and it’s been tanking for months now. Retail sales are down, and the folks running the show in Trenton aren’t smiling. How bad’s the frown? Well, for the first six months of the current budget year – the fiscal calendar runs July 1-June 30 – sales tax collection is off target by nearly $250 million. In that period, sales tax collection was $4.13 billion; big number, huh? See how important sales tax is?

So back to microbrewers and the strong arm of the law. Two sixes or two growlers, no more. Alas, the state is cheating itself out of sales tax revenue. How sad. Does this mean craft beer is the salvation of the state’s crippled finances (which were troubled even before credit default swaps and subprime loans and all those other finance terms that became the iceberg the SS National Economy rammed)? Of course not. Craft brewing is a niche industry, but New Jersey needs its small businesses as much as it needs its big ones. Because revenue is revenue, and selling beer generates it. So what not capitalize on it?

Having a comparison of revenues generated by Garden State wineries and the microbrewers could illustrate revenue potential if the Trenton would only take the yoke off brewers. Some of the state’s production brewers these days are rallying to that point, getting restless under the rules they've had to play by for better than a decade. And honestly, they should be allowed to sell unfettered like the wineries.

And a note to critics of this idea: Don’t confuse allowing this freedom as competition with liquor stores situated along main highways and near shopping centers, which provide enjoy far greater access to the buying public than breweries located in industrial parks etc. and tend to draw beer enthusiasts and beer travelers with their tours and open houses. To be sure, selling a couple of cases to the beer tourist serves to augment business for the brewers, not form a backbone. So if Joe Craft Sixpack on a brewery tour wants to say "I'll take all you got in cold case" and pony up for it, how is that a problem? He's buying at an added 7 cents on the dollar, which the state gets.

One other thing: This business of bottling up the brewpubs, limiting them to on-site sales only is another ill-conceived yoke on a free brewing market. Regulations requiring you be either brewpub or production brewery, both not both, are simply beyond shortsighted. And quite frankly, brewers in neighboring states enjoy that freedom and are putting packaged beer on Jersey shelves. No one’s talking about protectionism, but geez, just level the playing field and let the Jersey brewpubs have a shot at additional revenue streams. And ditto for production brewers, should they wanted to diversify their approach, let 'em open a bar under their banner if they're willing to pay the extortionate price for a consumption license (that's another topic for another time).

It just makes sense to revisit and modernize New Jersey's brewery regulations, especially in the light of a state that’s broke, does little to encourage business, and worse still, creates obstacles to commerce.

It's 2009, and DC isn't the only place that needs change.